NLC back taxation of Internet-based commerce

Taxation of Internet-based commerce will provide vital revenue for local governments, according to the National League of Cities (NLC). But a top official this week accused a body appointed by Congress to look into the issue as being "slanted" against the interests of local governments.

Donald Borut, executive director of the NLC, in a presentation to the annual International City/County Management Association (ICMA) conference in Portland, Ore., argued strongly in favor of state and local governments being allowed to impose taxes for commercial business done over the Internet. The current retail sales tax is the single largest source of state tax revenue and a major part of local government revenues.

But the federal government has imposed a three-year moratorium on Internet sales taxes, and a Congressional Advisory Commission on Electronic Commerce is due to report on the issue next year. However, Borut told ICMA attendees, the commission "is not providing as flat a playing field as we originally thought," charging that the makeup of a crucial drafting committee had been "slanted" in favor of those proposing low or no taxes.

Recent moves in Congress also weigh in against taxation, Borut said. Sen. John McCain (R-Ariz.) recently introduced a bill that would make the ban on Internet sales taxes permanent, and other law-makers reportedly are preparing proposals to the World Trade Organization that would spread the tax moratorium to other countries around the world.

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